CIMB Group sees second half to remain challenging

Datuk Abdul Rahman Ahmad, Group CEO, CIMB Group (right) and Khairul Rifaie, Group Chief Financial Officer, CIMB Group at the announcement of CIMB Group’s first half FY2020 financial results.

PETALING JAYA: CIMB Group Holdings Bhd expects the second half of 2020 to remain challenging and loan loss provisions to remain elevated.

Group CEO Datuk Abdul Rahman Ahmad told journalists via a video conference that the elevated provisions are driven by recognition of the impact of macroeconomic factors under MFRS9 accounting standard, and also impairments on specific accounts outside Malaysia.

As of June 2020, gross impaired loans ratio rose to 3.6% from 3.1% year-on-year.

For the first half, the group posted a 71% year-on-year drop in net profit to RM785mil, while revenue was 7.2% lower at RM8bil. Net earnings per share was 7.9 sen, compared with 28 sen a year ago.

The drop in revenue was mainly due to a 27.6% drop in non-interest income to RM1.86bil, versus RM2.57bil a year ago due to lower fee and trading income in line with weaker economic activity.

No interim dividend was declared and the group will review the dividend position at year-end.

Abdul Rahman said the group maintained its dividend payout policy of 40% to 60%.

CIMB Group chief financial officer Khairul Rifaie said that this year, net interest margin (NIM) is expected to be lower by 10 to 15 basis points (NIM was 2.46% in 2019) due to interest rate cuts across the region as well as the one-off modification loss arising from fixed-rate loans taken in the second quarter.

The modification loss for the first half was RM281mil.

Abdul Rahman pointed out that for the first half, “Our underlying business remains resilient. Loans and deposits grew 3.9% and 7.8%, respectively, driving net interest income to grow by 6% year-on-year, excluding modification loss impact.”

For the second quarter ended June 30,2020, the group’s net profit plunged nearly 82% year-on-year to RM277mil, while revenue slipped 13.5% to RM3.86bil.

The group is also targetting a cost reduction of RM500mil or 5% for 2020. “We aim to aggressively rationalise cost. Cost on an absolute basis has already declined by 3.3% for the first half, ” said Abdul Rahman.

The group has no plans for workforce layoffs, and he said, “The plans are to optimise investment and expenditure, and look at discretionary expenditure that we can defer as well as non-essential spending that we can optimise.”

“The group continues to be well-capitalised to withstand shocks through our prudent approach with a strong CET-1 ratio and liquidity coverage ratio remaining comfortably above 100%, ” he added.

Abdul Rahman also highlighted that the group continued to provide extended relief and support to affected customers with CIMB’s Targeted Assistance Programme.

As at end-June, CIMB Group’s Covid-19 financial assistance initiatives have benefitted over 1.25 million retail customers and around 16,000 small and medium enterprises and corporate clients in terms of cash flow alleviation.

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